Browsing the archives for the Acre tag.

Why is Ottawa Overpaying Developers for Land?

Green Reality, South March Highlands

The City’s scarce environmental purchase funds appear to be used to overpay Urbandale and other developers when buying lands designated Urban Natural Area (UNA).

According to the Oct 12, 2012 staff report to the City’s Finance Committee, the going price for environmental land acquisition is $160 K / acre which is up 50% over the originally budgeted amount in 2010.

Considering that UNA lands are already undeveloped and cannot ever be developed, you have to wonder how this exorbitant price increase was justified over only 2 years.

Even if staff are using recent price increases for developed land, the math doesn’t work.

  • According to the Ottawa Real Estate Board, the average price of resale homes in Ottawa increased only 2.3% in 2012 over 2011 compared to 7.7% in 2011 over 2010.
  • Inflating the 2010 budget estimate of $101, 250 / acre x 1.077 x 1.023 = $111,554 / acre  in 2012
  • So why are staff agreeing to pay $160,000 / acre?

But is it even believable that land price increases for developed real estate should be used to justify massive increase in value for land that can never be developed?  On what basis would any reasonable person expect there to be any increase in value at all beyond inflation?

  • Allowing for inflation results in only a compounded increase of only about  4%

So how can a price increase of 50% be rationally justified?

  • It seems that either the process is corrupt  or the City managers that are responsible for these funds are so incompetent that they should be dismissed.

A review of land acquisitions from 1998 – 2010 reveals that the most that the City ever paid in the past was only $86 K /acre and that the only transaction in 2010 was at $71 K / acre.

What seems particularly odious is that the same staff were busy justifying a price ranging between $231 K /acre t0 $363 K / acre in Nov 2010.  The Coalition to Protect the South March Highlands asked the City to purchase 74 acres of KNL’s land in Beaver Pond Forest prior to it being clear-cut:

  • KNL Phase 9 is 110 acres of which KNL had already agreed to convey 40% to the City for free as UNA
  • City staff had estimated the value of the remaining 66 acres at $18 M or $231 K / acre for unserviced land that had previously been designated as NEA prior to granting Campeau development rights in the SMH
  • Note that KNL is a joint venture between Urbandale and Richcraft.  It seems that Urbandale has remarkably good fortune in extracting top-dollar from the City for land acquisitions and that City staff are often willing to pay it.

Since UNA land cannot be developed, and tax assessments are supposed to be never more than 3 years out of date, why does the City ever pay more than the assessed value of the land for taxes multiplied by the appropriate inflation adjustment?

So it appears that staff has misled Council on several occasions:

  • By using an estimate of $100 K /acre in the 2010 budget when the City had only paid $71 K / acre that year
  • By reporting to City Council  in 2010 that a fair price was effectively $231 K / acre or higher when Council was deliberating on the Beaver Pond Forest acquisition
  • By consistently overpaying developers by 50% when acquiring UNA land post-2010
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Turning a Good Swap Into a Bad One

South March Highlands

The original swap proposed by Marianne Wilkinson was workable only because it traded land that was in immediate threat of development for land that was not and did so on an equal basis.  More importantly, it was part and parcel of a larger deal which protected an environmentally significant forest.

However the Peter Hume deal that Councillor Wilkinson settled for on Dec 15, is worse than completely meaningless – it results in a net loss of greenspace at an opportunity cost of $1.46 M!

According to city staff’s ever moving estimate, the 74 acres of Beaver Pond Forest has a fair market value of $18 M or $243 K / acre.

The Hume-Wilkinson deal approved by council surrenders 12 acres elsewhere in the South March Highlands to obtain a 6 acre corridor that has no possible ecological function.  The net loss of trading 12 acres to get 6 at a rate of $243 K / acre means that the city just paid Urbandale the equivalent of $1.46 M for Marianne’s precious corridor.

This corridor is to be an 80m wide pathway through the middle of a subdivision that is supposed to start at Beaver Pond, cross a road, and terminate at Shirley’s Brook.  There is no ecological value to it, while the land that was surrendered is adjacent to a larger protected area.

What was she thinking?

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It Costs Only $23 Million To Protect the SMH

South March Highlands

According to the 2006 Kanata Lakes North Servicability Study, the KNL subdivision is intended to proceed in 4 phases:

  1. The area south of the Kizell Wetland (currently in progress).
  2. The Beaver Pond Forest north of Beaver Pond and south of the rail line
  3. The Richardson Forest north of Kizell Wetland and south of the rail line
  4. The Trillium Woods west of the protected portion, north of the rail line and south of TFDE.

For some inexplicable reason relating to the subphasing of Phase 1, the 2nd phase is currently being referred to as Phase 6 by KNL.  To avoid confusion, we will refer to the original phases in this article as illustrated below (click to see larger map):

 
KNL Subdivision Phases

The 2006 Serviceability Study also provides details of the exact size of the drainage areas within the subdivision.  From this information, we are able to calculate the exact size of the developed portion of the subdivision.

This information is important to calculating the fair value of the land to KNL because KNL paid nothing to acquire the open 40% portion of the subdivision, nor is KNL able to sell lots on land zoned as Institutional within the developed portion (unless the school boards decline the use of the land).

Based on this information we are able to calculate the developable size of each phase as follows:

  1. Phase 1 is not applicable since it has already been destroyed by development.
  2. Phase 2 is 29.81 hectares (73.63 acres)
  3. Phase 3 is 59.86 hectares (147.8 acres)
  4. Phase 4 is 33.81 hectares (83.51 acres)

The total area is 123.48 hectares or 304.94 acres.

The going rate for unserviced land in North Kanata is $75,000 an acre, so the fair price for purchasing the KNL development is just under $23 Million.

The City of Ottawa is planning to spend over $129 M to refurbish Landsdowne Park, so any protestation that they have no money to acquire the central portion of the South March Highlands is preposterous!

The time has come to DEMAND that the Mayor do what is right and expropriate the KNL development to protect the South March Highlands.

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